In an effort to fund ongoing working capital requirements and capital expenditures, particularly inventory and remodeling costs associated with next month's planned opening of its new home departments, J.C. Penney (NYSE: JCP ) announced today that it will draw $850 million from its existing $1.85 billion revolving credit line.
Drawing on the credit line is the first significant action taken by new CEO Myron "Mike" Ullman III, who rejoined J.C. Penney as its chief executive officer last week, replacing Ron Johnson. Ullman was the CEO of J.C. Penney until late 2011, when he left the company prior to Johnson's appointment.
The current interest rate on the $850 million credit line is 5.25%. The $850 million draw will reach maturity April 4, 2014.
"As we near completion of the home department transformation in over 500 stores, we have been undertaking and will continue to experience a significant inventory build and increase in capital expenditures," J.C. Penney CFO Ken Hannah is quoted as saying in the company press release. "The draw under our revolver today provides more than our current funding needs to ensure our continued liquidity. Moreover, we will continue to explore additional capital raising alternatives with the assistance of our financial advisors."
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